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QUESTION

(4) Suppose labor supply is given by w=10+2Ls, where w denotes the wage. Labor demand is given by w= 100-Ld.

(4) Suppose labor supply is given by w=10+2Ls, where w denotes the wage. Labor demand is given by w= 100-Ld.(a) Calculate the equilibrium labor quantity and the corresponding wage(b) Now assume the city imposes an environmental tax of $10 per unit of labor on firms. As a result, companies will now lower their willingness to pay for labor by $10 per worker. The city uses the money to beautify the local park, which attracts many workers to the city. An economic consultant firm finds out the labor supply curve will shift because workers will be happy with a wage that is $16 lower than before the improvement. Calculate the new equilibrium wage and the new number of jobs. Compared to (a), will the number of jobs increase or decrease?

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